China Beckons for Green-Energy Startups

China power: Boston Power was the first lithium-ion battery maker to be certified by the China Environmental Certification Institute. Company founder Christina Lampe-Onnerud is shown with CEC Vice President Li Jian.

Many in the U.S. have an interest in getting clean-tech ventures off the ground. Among them are the government, capital markets, industry, and science labs. But China seems ready to do more on every front to make such projects happen, and to do it right now—without red tape or concern about economic turmoil.

Leading-edge battery maker Boston Power appears to have come to that conclusion. The company is set to move to China, where the government is helping to cut the firm a $125-million deal that no one else is likely to match. The deal could leave the company poised to be a part of what could be a mushrooming market there in electric vehicles. “This is really the next chapter for us,” says Christina Lampe-Onnerud, who founded Boston Power in 2005.

Lampe-Onnerud, a former star technology consultant at Arthur D. Little and top scientist at Bell Communications Research, has been much lauded in the world of high-tech green startups, thanks to Boston Power’s innovations in the chemistry of lithium-ion batteries, and to the success the company has had in selling the resulting higher-capacity, faster-charging batteries to Hewlett-Packard for laptops.

Boston Power seemed even hotter in 2008 when Lampe-Onnerud announced she was setting her sights on producing batteries for the electric-vehicle market. But this market has been slow to materialize and highly competitive, pitting Boston Power against other high-flying startups, including A123 Systems, based in Waltham, Massachusetts.

In 2009, Boston Power failed to win a substantial loan guarantee from the U.S. Department of Energy that would have financed a Massachusetts factory—the company currently manufactures via Taiwanese partner GP Batteries. That same year, a deal backed by the Swedish government to help put the company’s batteries in electric vehicles from foundering Saab went nowhere.

The new deal should put Boston Power, which has raised nearly $200 million in funding, in a better position to compete for at least a foothold in what is expected to eventually be a large global market for electric-vehicle batteries. The deal was set up by GSR Ventures, based in Beijing and Palo Alto, California. GSR has more than $1 billion under management and is investing mostly in high-tech startups doing business in China. Neither GSR’s managing director, Sonny Wu, nor Lampe-Onnerud would provide details on the exact breakdown of the new financing, but both confirmed that the $125-million value represents a mix of private equity and Chinese-government grants, low-interest loans, and financial and tax incentives.

The equity investment comes from venture-capital firms Oak Investment Partners and Foundation Asset Management, which are previous Boston Power investors, as well as from GSR. And the $125 million might not be all there is to the deal, hinted Lampe-Onnerud. “Even more will unfold over the next six months,” she says.